State aid Services of general economic interest: UK Post Office Ltd by Jorge Villanueva and Michal Struk (1) Decision taken under Article 106 TFEU constitutes State aid. However, such aid can be compatible with the Single Market provided it satis- (ex Article 86(2) EC) fies the conditions laid down in the EU Framework On 23 March 2011 the European Commission au- on State aid in the form of public service compen- thorised public assistance to the UK Post Office sation. (4) In particular, the public service must be Ltd (POL), for a period of one year starting on clearly defined and entrusted by the public authori- 1 April 2011, for the funding of its network of post ties, and public support may not overcompensate offices and the continuation of existing loan facili- the service providers. ties funding the provision of cash services at post In addition, in view of the arrangements between office counters. (2) The Commission concluded that Royal Mail and POL the Commission was not able the aid is compatible with EU rules because it does to exclude the possibility that the measures in ques- not overcompensate the net costs of the important tion (and in particular the network subsidy pay- public service tasks entrusted to POL and thus does ment) fall within the scope of Directive 97/67/EC not give POL any unfair competitive advantage. of 15 December 1997 on common rules for the POL is a limited company incorporated under UK development of the internal market of Community private commercial law in 2001 and a subsidiary postal services and the improvement of quality of company of the Royal Mail Group plc. It oper- service as amended in 2008. (5) Therefore, in order ates a nationwide network of around 11 500 post to cover all eventualities and take into account the office counter outlets. These outlets provide over- de facto role of POL, and without taking a position the-counter access to social benefit payments, ba- on whether POL should be classified as a postal sic banking services and other services in the UK, service provider, the Commission also carried out and therefore act as focal points for the commu- the assessment of the aid measures under the Postal nities they serve. The proposed measures would Directive and, in particular, under its Annex I. prolong by one year a ‘Network Subsidy Payment’ According to Annex I the net cost of universal of £ 180 m (€ 211 m) to keep open unprofitable postal service obligations has to be calculated as offices, in rural areas for example, and a ‘Work- the difference between the net cost for a designated ing Capital Facility’ up to a ceiling of £ 1 150 mil- universal service provider of operating with the lion (€ 1 348 million), which enables POL to hold universal service obligations and the same postal enough cash to carry out its public service obliga- service provider operating without the universal tions. The current authorisation for these measures service obligations. Moreover, recital 26 in the pre- expires on 31 March 2011. The one-year extension amble to Directive 2008/6/EC establishes that an is necessary for POL to continue carrying out the unfair burden must be found to exist before any services of general economic interest entrusted to it compensation is paid. An unfair burden is a bur- by the UK Government. den which is excessive in relation to the undertak- The UK authorities also notified the terms of the ing’s ability to bear it, account being taken of all the Post Office Card Account (POCA) contract signed undertaking’s own characteristics, in particular the between POL and the Department of Work and quality of its equipment, its economic and financial Pensions (DWP) on 5 March 2009. The POCA is situation and its market share. (6) a basic current account run by POL on behalf of The Commission concluded that the continuation DWP which is used for paying social benefits to of the Network Subsidy Payment and the Work- people who do not have any other bank account. ing Capital Facility, as well as any aid contained in In line with the jurisprudence of the European the terms of the POCA contract is, until 31 March Court of Justice, in particular the Altmark rul- 2012, compatible with the EU’s Internal Market ing, (3) the Commission concluded that the measure (Article 106(2) of the Treaty on the Functioning of the European Union (TFEU). The aid did not (1) The content of this article does not necessarily reflect the official position of the European Commission. Re- sponsibility for the views expressed lies entirely with the (4) see IP/05/937 and MEMO/05/258. authors. (5) IP/08/323. (2) SA.31156 (N508/2010). (6) Case C-389/08, Base NV and Others, judgment of 6 Oc- (3) C 280/00. tober 2010, paragraph 42. 24 Number 2 — 2011 Competition Policy Newsletter exceed the cost of fulfilling the services liable to services of general economic interest (SGEIs), the S be compensated under the framework and, in view net cost for providing access to universal postal ser- tate of POL’s overall precarious financial situation and, vices for Royal Mail did constitute an ‘unfair finan- in particular, POL’s cumulated losses originating cial burden’ for POL within the meaning of Annex aid in the provision of universal services and other I of the Postal Directive. Number 2 — 2011 25.